Facebook and Tesla’s Legal Troubles

Grind for October 3rd, 2018
“A business that makes nothing but money is a poor business.”

– Henry Ford

Not Again

The Headline

Largest-ever Facebook security breach puts 50 million accounts at risk

The Grind

Facebook on Friday announced that a security flaw allowed hackers to access nearly 50 million accounts.

The breach, which is the largest ever for the social media site, comes at a time when Facebook is still trying to recover from multiple controversies regarding its handling of users’ personal data.

The announcement pushed Facebook shares down about 1.1%.

The Details

“The investigation is still very early so we do not yet know if any of the accounts were actually misused,” said Facebook CEO Mark Zuckerberg. “This, of course, may change.”

The security flaw, which dates back to an update introduced last summer, allowed hackers to steal access tokes. This gave them the ability to use accounts as if they were the account holder – meaning they could access a person’s messages, photos, and apps.

Facebook claims it has fixed the vulnerability and reset the access tokens for all 50 million accounts plus an additional 40 million that may have been at risk. Those 90 million users have been logged out and will receive a security notice next time they access the site.

In the meantime, Facebook is working with the FBI to discover who was responsible for the attack. The company also said it would double its security team from 10,000 people to 20,000.

“Security is an arms race, and we’re continuing to improve our defenses,” said Zuckerberg. “This just underscores there are constant attacks from people who are trying to underscores accounts in our community.”

Hell Or High Water

The Headline

Tesla CEO Elon Musk to fight SEC lawsuit

The Grind

In one of the highest-profile civil securities fraud cases in years, the SEC is suing Tesla CEO Elon Musk after he mislead shareholders regarding the possibility of a corporate buyout.

“Am considering taking Tesla private at $420. Funding secured,” tweeted Musk on August 7th. “Shareholders either to sell at 420 or hold shares & go private.” Less than a month later, he changed his mind.

Had the buyout actually happened, it would have pushed Tesla’s value above $70 billion, making it the largest buyout in history.

The Details

Mr. Musk and his lawyers decided last minute to fight the SEC’s lawsuit – which seeks to push Musk out of his own company and to ban him from working as an executive for any public company in the US.

According to the SEC, Musk “never discussed a going-private transaction at $420 per share with any potential funding source.” His statements caused harm to investors by disrupting the market for Tesla shares, which jumped 10% immediately following his tweets.

“It’s an easy case,” explains Charles Elson, an expert in corporate law. “He said in the tweet he had financing, and apparently he didn’t…It’s about as straightforward as you can get.”

Musk insists that he spoke with Saudi Arabia’s sovereign-wealth fund on July 31st about taking the company private, but the SEC insists the discussion did not include financial details.

“This unjustified action by the SEC leaves me deeply saddened and disappointed,” said Musk. “I have always taken action in the best interests of truth, transparency, and investors. Integrity is the most important value in my life and the facts will show I never compromised this in any way.”

Tesla shares dropped nearly 10% on Thursday.

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